However, banks are thinking of making a representation to both the Reserve Bank of India (RBI) and the Centre through the Indian Banks’ Association (IBA). The IBA approached the government last month asking it to enhance the scope of the scheme for ex-gratia payment of the difference between compound interest
and simple interest, to cover the additional refund arising out of the Supreme Court’s order. The government hasn’t shown any inclination to compensate banks for the compound interest waiver, estimated at around Rs 8,000 crore, the official said.
Of this Rs 8,000 crore, private banks’ share is about 37 per cent and that of public sector banks around 60 per cent, said Anil Gupta, vice president and sector head – financial sector ratings at ICRA. The banks have to adjust the penal interest in the next installment in April.
The lenders have also asked the IBA to approach the Department of Financial Services as their balance sheets are stretched. The Supreme Court on March 23 ruled that banks cannot charge interest on interest for accounts that sought a moratorium last year and the amount so collected must be refunded in the next installment of the loan account.
Last month, Business Standard had reported that the government may not foot the Rs 8,000-crore reimbursement bill. It felt it could not bear the extra burden as it had already announced a relief measure for loans up to Rs 2 crore. Besides, the onus of reimbursing customers does not fall entirely on it, according to the apex court’s order.
In October 2020, the government had announced a scheme to waive compound interest for loans below Rs 2 crore, that included education, housing, auto, consumer durable loans, loans advanced to micro, small, and medium enterprises, and credit card dues.
Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.
We, however, have a request.
As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.
Support quality journalism and subscribe to Business Standard.